AmMed Direct To Pay $18 Million Penalty In Bait-And-Switch Scheme

Diabetic supply firm AmMed Direct will pay an $18 million penalty to settle government claims that it wrongly billed Medicare for diabetes testing supplies and other products in a bait-and-switch scheme. Most of the money — $17.6 million — will go to the U.S. government, with the state of Tennessee getting $439,003 as part of the civil settlement. The penalties, which also include a $2.8 million payment to a whistle-blower in the long-running dispute, were revealed last month by the U.S. Attorney’s Office in Tennessee.

According to federal authorities, Nashville-based AmMed ran a marketing scheme from 2008 through early 2010 in which it advertised free cookbooks, without any mention of Medicare supplies, to induce Medicare customers to call AmMed or its telemarketing sales team. Once AmMed’s representatives confirmed that a beneficiary calling for the free cookbook was covered by Medicare, they tried to sell the caller supplies and then improperly billed Medicare for the merchandise that was ordered. If a customer later returned his or her diabetic supplies to AmMed, the company would fail to refund money to Medicare or TennCare (the state’s poverty health program) in a timely manner, according to investigators.

Before the company learned of the federal and state inquiry, AmMed informed Medicare that it had failed to refund money for returned supplies. The company then started paying refunds to Medicare and TennCare. The $18 million settlement value includes refunds made voluntarily by AmMed Direct during the past two years, according to the company. As part of the case, whistle-blower Bryan McNeese will get payments of roughly $2.8 million under provisions of the federal False Claims Act. Derrick L. Jackson, special agent in charge of the U.S. Department of Health and Human Services’ Office of Inspector General in Atlanta, had this to say:

This company deceived Medicare beneficiaries by offering them free cookbooks, when they were really selling diabetic supplies. These types of deceptive marketing practices are a type of bait and switch that are designed to trick the most vulnerable members of our society.

The case was investigated by the Department of Health and Human Services-Office of Inspector General, the Tennessee Bureau of Investigation – Medicaid Fraud Control Unit, the Office of Inspector General of the U.S. Department of Defense, the U.S. Attorney’s Office for the Middle District of Tennessee, and the Tennessee Attorney General’s Office.